Business, 27.12.2020 15:20 Joshghopper

On January 1, 2021, Sandhill Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Sandhill to make annual payments of $208000 at the beginning of each year for 5 years beginning on January 1, 2021 with the title passing to Sandhill at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sandhill uses the straight-line method of depreciation for all of its fixed assets. Sandhill accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $867332 at an effective interest rate of 10%. In 2021, Sandhill should record interest expense of: a. $86733.
b. $65933.
c. $142067.
d. $121267.

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On January 1, 2021, Sandhill Corporation signed a 5-year noncancelable lease for equipment. The term...

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